Bringing it all back home

Has there ever been a quicker boost to the economy than the one we have experienced under President Trump over the past year? As Joel Kotkin puts it in this City Journal column: “New job numbers are robust, GDP and wages continue to rise, stocks are soaring, unemployment continues to decline, and overall growth is at its highest in 13 years. And this salutary picture is not exclusive to big business; the index of small business optimism, as measured by the National Federation of Independent Business, has reached its highest level in the 45-year history of the survey.”

As the Trump administration has done its best to remove the foot placed on the neck of various sectors of the American economy by the Obama administration, we have had something like a controlled experiment in two economic theories. One economic theory (Obama’s) held that we were to reconcile ourselves to historically low GDP growth of 2 percent at best and one of which (Trump’s) held that normal growth was possible again with policies intended to foster it.

The immediate effects of the tax reform enacted last year are at least as striking. Indeed, they are almost shocking. Even before the effective date of the law, companies started announcing that they would pay $1,000 bonuses to employees as a result of the new law. AT&T led the parade with its December 20 press release specifying that the bonus would be paid to “all union-represented, non-management and front-line managers.” That is more than 200,000 employees. The company also announced that it would invest an additional $1 billion in the United States in 2018. Many companies have followed suit, attributing their actions to the new law.

Some large companies — Well Fargo and USBank, to take two examples — have also announced wage increases at the bottom of their wage scales. I should think that these increases will have ripple effects benefiting other hourly workers. In the first news story I have seen on the new law’s possible impact on wages, however, CNBC has thrown a dash of cold water. Taking the CNBC story at face value, I think it’s fair to say that the early returns are promising (see the listing of “those with detailed announcements” at the bottom of the CNBC story), but that it’s too soon to tell on this important point. The results are, not surprisingly, inconclusive.

Yesterday’s announcement by Apple puts an exclamation point on these developments. Wall Street Journal editor Gerard Baker puts it this way in his 10-point guide to the day’s news (from which I have borrowed the heading of this post):

Apple announced it would pay a one-time tax of $38 billion on its overseas cash holdings and ramp up spending in the U.S. to emphasize its contributions to the American economy and counter criticism it outsourced manufacturing to China. The tech giant said it would invest $30 billion in the country over five years. It plans to build a new campus and create more than 20,000 jobs, as well as expand investment in advanced manufacturing in the country. The tax-code overhaul signed into law late last year by President Trump included an incentive for U.S. companies to bring home offshore holdings, with companies required to pay a one-time tax of 15.5% on overseas profits held in cash and other liquid assets. Apple didn’t say how much of its $252.3 billion offshore cash pile it plans to bring home. The tax payment by the world’s most valuable company may signal a tipping point for U.S. corporate offshore cash hoards and set off a trend.